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SOLEDAD O'BRIEN, CNN ANCHOR: Here's a look at the up to the minute developments as the nation enters the Christmas holidays on orange alert. One government official says numerous people on terrorist watch lists have been blocked from entering the country since December 1 at more than one location. And there are particular concerns about New York, Washington, Los Angeles and Las Vegas. But the intelligence also cites rural areas in the East and the Southwest as possible targets. And because of the raised threat level, the Pentagon today will conduct what it calls a continuity of government exercise. Key officials will be moved to secret locations. Defense Secretary Donald Rumsfeld will not be participating.

Federal officials say that this alert is more intense and security concerns more serious than previous warnings.

Here's what President Bush had to say about the security concerns.

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GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Our government is doing everything we can to protect our country. We've got a lot of really decent, hard working Americans who will be working over the holiday season to do everything we can to protect Americans from harm.

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O'BRIEN: New York City has been at the orange alert level ever since the months after 9/11.

Talking to us this morning about that and the raised threat level overall, plus the plans for a September 11 memorial, the former mayor of New York City, Rudy Giuliani.

Nice to see you.

Thanks for coming in to talk to us.

RUDY GIULIANI, FORMER MAYOR OF NEW YORK CITY: Good morning, Soledad.

O'BRIEN: We've got, obviously, a lot of ground to cover.

GIULIANI: Thank you.

O'BRIEN: So we'll get right into it.

We've been reporting, as you just heard, numerous persons on the terrorist watch list that have been stopped from entering the country.

When you hear something like that, do you say wow, that's a great sign that all the security is working? Or do you say wow, that's incredibly concerning, because clearly there are many people and maybe with so many attempts eventually one's going to get through?

GIULIANI: Rationally you say both, right? I mean the reality is that is a lot more security than existed on or before September 11 of 2001, because we're more aware of it now. So the level of security and the way in which we do it is much better than when those attacks happened. But then as a realist, you understand that terrorists look for the unanticipated. They try to look for the weak link. And no matter how good a system it is, it's impossible to make it perfect. So that's why I think it creates this kind of anxiety. It's -- but for people at home, they should just go about their lives.

O'BRIEN: I find it so difficult when people -- when officials sort of give you that advice. On one hand you say the word anxiety and these things...

GIULIANI: Right.

O'BRIEN: But go about your daily life.

GIULIANI: Life is that. Life is living with risk. You know, walk across the street and you get hit by a car, right? I mean life is living with risk. So this is another risk that we now have to deal with. This is, that's the risk of terrorism. So you want to explain it to people. And then they have to try to put it into their lives in a reasonable way. It's something that the government should be concerned about, large businesses, large institutions. They should -- colleges, schools -- they should do more to be ready for a possible terrorist attack.

And then people have to go about their lives, because there's nothing they can really do about it other than, you know, if they're in a position where they can, like they're a police officer or a firefighter, then they have to be more on alert.

The purpose of these warnings is much more for public safety than it is for the citizens in general. But it's impossible, our public safety network is so large it's impossible just to communicate quietly. It's going to get out anyway, so you might as well -- you might as well put out the alert.

O'BRIEN: Does it surprise you at all when you hear reports about al Qaeda recruits possibly being used in -- as flight members, flight crews on foreign airlines? Does it surprise you?

GIULIANI: Nothing surprises me after September 11, 2001. I think I took that word out of my vocabulary with that incident. No, it would not surprise me. But I'm also -- I also think that flight security is the one area in which the most emphasis was put. I just flew back and forth to Israel. So you see the heaviest level of security on those flights. And I'm very comfortable with the kind of security that's being provided at this point.

Again, it is not foolproof. Any system, a person can try to figure out how to crack. But, I mean a great deal is being done now in the United States and internationally that used to be done in Israel for the last 20 years.

O'BRIEN: Well, let's talk a little bit about your trip to Israel.

What did you take away as far as seeing people who live with terror attacks and suicide bombings virtually daily?

GIULIANI: They've gone about integrating it into their lives about as well as you can. But there's much more security in Israel than there is just about anywhere else. I mean you go into a shopping center -- going into a shopping center in Israel is like going into an airport in the United States. I mean you go through a magnetometer. There are security people there. If there's anything wrong with the magnetometer, they have a wand. They search you. I'm pretty sure they have lists of people who are on the watch list of people who might be possible terrorists.

And when I was there, they hadn't had an attack in a couple weeks. And I said to the prime minister, you know, I hope you feel some relief that a couple weeks went by. And he looked at me and he said we do, we thank god, but the fact is we foiled about 16 of these in the last two weeks. We had about, I think he said 16 of them. Or 12. twelve or 16 possible attacks that we found out about and we were able to stop it before it actually happened.

So I mean they have to be on alert all the time.

O'BRIEN: Let's turn the corner and talk a little about the ground zero memorial. You have said publicly that you're not crazy about what you've seen so far.

What don't you like? What would you like to see?

GIULIANI: Well, what I would like to see is for the memorial to dominate. The most important thing about the design has to be the significance of the place. It's the place where the worst attack in American history took place, one of the bravest responses that people have ever had. It's the place that people will want to be interested in 50 and 100 years from now, the way they are Gettysburg or the Vietnam Memorial. And...

O'BRIEN: So you think it just doesn't do enough right now?

GIULIANI: It doesn't capture it. It's really just more an attempt to replace office space. The, you can feel the office space dominating and not the significance of the place, the library, the museum, the grand design that's going to capture this the way the Vietnam Memorial captured the Vietnam War in such a brilliant way, you know, the idea that the Vietnam War, the people who fought that war weren't given the honor they deserved and now every name of every person lost was going to be there right in Washington, like Thomas Jefferson's name is there.

So there was a significance to that that's missing here. And I think I know the reason. Because there's such a imperative to replace the office space. Well, the office space isn't going to count 50 years from now. Doing the memorial right will count.

O'BRIEN: Do you think it's going to happen? It'll be done the right...

GIULIANI: I think so. I think...

O'BRIEN: "The right way?"

GIULIANI: I think there's a lot of sentiment in that direction and I think, again, we've got to think about how future generations are going to think about us, not just the way we feel today.

O'BRIEN: Former New York City Mayor Rudy Giuliani.

Nice to have you.

Thanks...

GIULIANI: Have a wonderful holiday.

O'BRIEN: Thank you and likewise, a nice safe one, I hope, for us and everybody.

GIULIANI: Yes, for everyone.

O'BRIEN: Appreciate it.

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